A stranded giant ship has made the global automotive industry “stuck in the throat.”
Editor’s note: This article is from the micro-channel public number “NBD car” (ID: NBD-AUTO), Author: DONG God.
On March 29, local time, the heavy freighter “Long Give” that was trapped in the Suez Canal finally got out of the trap. In this six-day “serious ship jam of the century”, more than 300 ships were waiting to pass, and more than 1,000 freighters circumvented the Cape of Good Hope in Africa. According to estimates by the German insurance giant Allianz Group, the “ship jam” in the Suez Canal may cost global trade between US$6 billion and US$10 billion per week.
Not only that, but this “ship jam” has caused another severe damage to the recovering global automotive supply chain. It is reported that this shipping route is the main route for transporting complete vehicles, auto parts and other goods from Asia to Europe and the east coast of the United States. According to Bloomberg News, among the hundreds of freighters waiting near the Suez Canal, at least 17 are equipped with vehicles and related parts.
What’s more serious is that the shortage of auto parts may once again aggravate the shutdown of auto companies. At present, many car companies, including Volkswagen, Audi, BMW, etc., have stated that they are evaluating the incident to ensure that the factory supply situation will not deteriorate in the short term.
“We believe that the blockage of the Suez Canal will put more pressure on the global automotive industry.” Fitch Solutions said that due to chip shortages, rising shipping costs, and port delays caused by the new crown epidemic screening measures, the automotive industry has faced multiple Supply chain risk.
1 Auto industry hits another blow
Since February this year, it has been affected by factors such as extreme cold weather in some parts of the United States, power outages in Texas, and fires at the Renesas Electronics factory in Japan, including Ford, General Motors, Honda, Toyota, Volvo, Volkswagen and many other car companies. Announced plans to suspend or reduce production due to “core shortage”.
The occurrence of this “ship jam” incident may further aggravate the problem of automobile production capacity in Europe, thereby triggering a “chain reaction” on the global automobile industry chain. “European carmakers will be forced to reduce car production to ensure that they do not run out of parts.” Fitch Solutions said that although European carmakers are making efforts to diversify their supply chains, the industry still relies on Asia to supply them. Most of the auto parts needed, and the Suez Canal is the key trade route between the two regions.
Based on this, Volkswagen, Audi, BMW, etc. have all stated that they are evaluating the incident to ensure that the factory supply situation will not deteriorate in the short term. Among them, Audi said that the channel blockade may affect the delivery of the vehicle and the supply of materials on the way.
“Transportation usually takes several weeks, so the negative effects will not be immediately apparent.However, if the channel blockade lasts longer, the situation may change. “Audi said in an email statement.
Volkswagen said that so far the company’s production has not been affected by the transportation interruption. “However, if the traffic jam in the canal is too long, this situation will definitely need to be reassessed.”
The German chemical giant BASF believes that the length of the freight interruption will determine the specific impact of the accident on BASF’s supply chain. In BASF’s view, it is too early to estimate this, and it is fully monitoring the development.
“Because European manufacturers adopt the’Just-In-Time’ supply chain strategy, they do not stock spare parts, and the spare parts in their hands are only for short-term use, so they need to purchase parts from Asian manufacturers.” Moody’s Analyst Daniel Harlid believes that the strategy relies on precise and undisturbed delivery schedules, but from the current situation, even if the “ship jam” situation is quickly resolved, subsequent port congestion and further delays in the supply chain will also Will be inevitable.
Fitch Solutions said that if automakers in the region cannot obtain much-needed chips, they will be forced to suspend operations. We note that the impact of chips will be more direct than the broader supply chain disruption, because automakers are already severely lacking chips. Therefore, we believe that automakers will start to cut production within a week after the Suez Canal is blocked.
2 Supply chain line urgently needs diversification
In fact, the blockage of the Suez Canal made the already tight shipping market worse. Some analysts believe that even if the canal is reopened, European ports will be temporarily paralyzed by the mountain of cargo, and the global supply chain will still be under tremendous pressure.
According to data from the tanker tracking company Kpler, the total global crude oil trade by sea in 2020 will be 39.2 million barrels per day, of which 1.74 million barrels per day will pass through the Suez Canal. In addition, 1.54 million barrels of gasoline and diesel oil products pass through this canal every day, accounting for about 9% of the global trade in marine products. After the channel was blocked, international oil prices soared by nearly 6% on March 24, and the price of WTI crude oil futures rose to 60 US dollars per barrel, the largest increase in more than four months. As of press time, WTI crude oil futures have turned longer within the day, and are now reported at $61.88 per barrel.
“In addition to containers carrying a large number of consumer goods that were’stuck’ in the Suez Canal, many empty containers were also blocked there.” Cheng Xiaoyong, director of the Baocheng Futures Finance Research Institute, said that in the global supply chain In the case of urgent recovery, a large number of containers are shelved in European and American ports, which may aggravate the shortage of containers, and at the same time bring great challenges to maritime transport capacity.
After this “ship jam” incident,Some countries have begun to promote alternative routes. The Russian special envoy of the Arctic Council, Kochonov, said recently that the incident fully shows that countries need to consider waterways other than the Suez Canal, and the Arctic waterway is an obvious new option. Iran’s ambassador to Russia, Qazim Jalali, also proposed to open a new route through Iran. The proposed route “saves 30% of the cost compared with the Suez Canal”.
In addition, the China-Europe Express trains running on the “Belt and Road” route have also become strong competitors for alternatives. It is reported that some domestic international logistics service platforms have received a large number of inquiries about China-Europe freight train transportation in recent days. Bai Ming, deputy director of the International Market Research Institute of the Institute of International Trade and Economic Cooperation of the Ministry of Commerce, said that the China-Europe Railway Express can indeed relieve some of the pressure and allow Chinese importers and exporters to have more choices. At this time, China should play the role of China-Europe Express. , To overcome the drag and adverse effects of boat congestion in the Suez Canal.
It is worth mentioning that official data show that there will be 12,406 China-Europe freight trains in 2020, a year-on-year increase of 50%, and it will exceed the 10,000 train mark for the first time. In the first two months of this year, the Yangtze River Delta China-Europe Express trains became more and more popular. A total of 523 trains were opened and more than 50,000 TEUs were shipped, an increase of 127% and 125% respectively year-on-year.
“The suspension of navigation is a good reminder of why alternative routes such as the Arctic and land-based’One Belt One Road’ are so important. To the supply chain frustration, the global response should not be to withdraw from the global supply chain, but to establish More supply chains.” said Parag Khanna, managing partner of strategic consulting firm FutureMap.